Chinese Premier Wen Jiabao was interviewed by Fareed Zakaria on "Fareed Zakaria GPS" this weekend

Below is the complete transcript of Fareed Zakaria's interview with Chinese Premier Wen Jiabao. The interview was taped September 23, and portions were shown on "Fareed Zakaria GPS" on September 28.

Zakaria: We are now beginning the formal interview, just so everyone realizes.

Wen Jiabao: Before we begin, I would like to let you know that I will use the words from the bottom of my heart to answer your questions, which means that I will tell the truth to all your questions.

I always tell people that sometimes I may not tell what is on my mind, that as long as I speak out what is on my mind, the words are true.

I think you are now interviewing a statesman, and at the same time you are interviewing a statesman in his capacity as a common people.

I prefer dialogue to long-winded speeches, so you can always interrupt me and raise your questions. That would certainly make our dialogue more lively.

Zakaria: I look forward to the chance for this dialogue, and I begin by thanking you for giving us the opportunity and the honor. The first thing I have to ask you, I think is on many people's minds. What do you think of the current financial crisis affecting the United States, and does it make you think that the American model has many flaws in it that we are just recognizing now?

Wen Jiabao: I took office as the Chinese premier six years ago, and before then I was serving as the vice premier of the country. When I was the vice premier, I experienced another financial crisis but in Asia. And in wake of the Asian financial crisis, China adopted a proactive fiscal policy and decided not to devalue the RMB, the Chinese currency, but doing so we managed to overcome the difficulties. But now the problems in the United States started with the subprime crisis and later on, Fannie Mae and Freddie Mac were involved in the problems, and the Lehman Brothers was in trouble, Merrill Lynch was in trouble, the AIG was in trouble, and such large investment banking companies and insurance companies all encountered systematic problems.

And this has made me feel that this time the crisis that occurred in the United States may have an impact that will affect the whole world. Nonetheless, in face of such a crisis, we must also be aware that today's world is different from the world that people lived in back in the 1930s.

So this time we should join hands and meet the crisis together. If the financial and economic system in the United States go wrong, then the impact will be felt, not only in this country but also in China, in Asia and in the world at large.

I have noted a host of policies and measures adopted by the U.S. government to prevent an isolated crisis from becoming a systematic one, and I hope that measures and steps they have adopted will pay off. I also hope that these measures and steps will not only save some major U.S. financial companies but also help stabilize the U.S. economy and ensure that the U.S. economy will grow on a balanced course.

Zakaria: When you look at your own economy, as you know, there are many people who now say there will be a significant slowdown of the Chinese economy. There are people predicting that Chinese growth rates may slow to as much as 7 percent. Do you think that will happen? And if it does, I wonder, what do you think the consequences will be in China?

Wen Jiabao: Yes, indeed. China's economy has been growing at an annual average rate of 9.6 percent for 30 years running. This is a miracle.

Particularly between the year 2003 and 2007, China had enjoyed a double-digit growth for its economy, and at the same time the CPI grew in for less than 2 percent a year. It is fair to say that China has achieved a fairly fast and steady economic growth.

This time, China has been proactive in adopting regulatory measures. Our previous considerations were to prevent a fast-growing economy from becoming overheated and to prevent the faster soaring prices from becoming obvious inflation. But things have changed very fast, and I refer to the sub-prime crisis in the United States and the serious financial turbulences that follow the sub-prime crisis.

And as a result, we have seen a decline in external demand, and China's domestic demand can hardly be increased in a very significant manner in a short period of time. In this case, it is true that we do have this risk of a slowdown in the Chinese economy.

In this context, we must re-adjust the macroeconomic policy in China in order to adapt ourselves to external changes. What is most important is for us to strike a balance between economic growth, dampening the price rises and bringing inflation under control. And to strike a balance between job creation and dampening inflation and I know it's very, very difficult to strike a balance in all those areas.

We need to adopt a flexible and prudent macroeconomic policy to adapt to external changes in order to ensure very fast and steady economic growth and at the same time keeping inflation down.

Zakaria: Do you think you can continue to grow if the United States goes into a major recession?

Wen Jiabao: In the first half of this year, or given the statistics for the first eight months of this year, we can see that we have managed to do that.

A possible U.S. economic recession will certainly have an impact on the China economy. As we know that 10 years ago, the China-U.S. trade volume stood at only $102.6 billion U.S., while today the figures soar to $302 billion U.S., actually representing an increase of 1.5-fold. A shrinking of U.S. demand will certainly have an impact on China's export.

And the U.S. finance is closely connected with the Chinese finance. If anything goes wrong in the U.S. financial sector, we are anxious about the safety and security of Chinese capital.

That's why in the very beginning I have made it clear that the financial problems in this country not only concerns the interests of the United States but also that of China and the world at large.

Zakaria: There is another sense in which we are interdependent. China is the largest holder of U.S. Treasury bills. By some accounts, they're worth almost $1 trillion. It makes some Americans uneasy. Can you reassure them that China would never use this status as a weapon in some way?

Wen Jiabao: As I said, we believe that the U.S. real economy is still solidly based. Particularly the high-tech industries and the basic industries. Now, something has gone wrong in the virtual economy, but if this problem is properly addressed, then it is still possible to stabilize the economy in this country.

The Chinese government hopes very much that the U.S. side will be able to stabilize its economy and finance as quickly as possible, and we also hope to see sustained development in the United States as that will benefit China.

Of course, we are concerned about the safety and security of Chinese money here. But we believe that the United States is a credible country and particularly at such difficult times, China has reached out to the United States.

And actually we believe such a helping hand will help stabilize the entire global economy and finance and to prevent a major chaos from occurring in the global economic and financial system. I believe now cooperation is everything.

Zakaria: May I ask you about China's role in a broader sense? Many people see China as a superpower already, and they wonder: why is it not being more active in political resolution of issues such as the issue of Darfur or the issue of Iran and its nuclear ambitions?

There is a hope that China will play a role as a responsible stakeholder, to use Robert Zoellick's phrase when he was deputy secretary of state, and that China will be more active in managing the political problems in the world, and that so far it has not been active. How would you react to that?

Wen Jiabao: To answer this question, I need to correct some of the elements in your question first. China is NOT a superpower. Although China has a population of 1.3 billion and although in recent years China has registered fairly fast economic and social development since reform and opening up, China still has this problem of unbalanced development between different regions and between China's urban and rural areas. China remains a developing country.

We still have 800 million farmers in rural areas, and we still have dozens of million people living in poverty. As a matter of fact, over 60 million people in rural and urban areas in China still live on allowances for basic living costs in my country. And each year, we need to take care of about 23 million unemployed in urban areas and about 200 million farmers come and go to cities to find jobs in China. We need to make committed and very earnest efforts to address all these problems.

To address our own problems, we need to do a great deal. China is not a superpower. That's why we need to focus on our own development and on our efforts to improve people's lives.

Zakaria: But surely the Chinese government could pressure the Sudanese government or the Iranian government or the government in Burma to be less repressive. You have relations with all three of them.

Wen Jiabao: That brings me to your second question. Actually in the international community, China is a justice-upholding country. We never trade our principles.

Take the Darfur issue that you raised just now for example. China has always advocated that we need to adopt a dual-track approach to seek a solution to the Darfur issue. China was among the first countries sending peace-keepers to Darfur.

China was also the first country that gave assistance to Sudan and we also keep our efforts to engage the leaders in Sudan to try to seek a peaceful solution to the issue as quickly as possible.

Zakaria: Do you think it would be dangerous for the world if Iran got nuclear weapons? And what do you think the world should do to try to stop that possibility?

Wen Jiabao: We are not supportive of a nuclear rise to Iran. We believe that Iran has the right to develop a utilization of nuclear energy in a peaceful way. But such efforts should be subject to the safeguards of the [International Atomic Energy Agency], and Iran should not develop nuclear weapons. As far as the Iranian nuclear issue is concerned, China's stance is clear-cut.

We hope that through promoting the talks concerning this issue, that we will be able to encourage the Iranian authorities to give up any idea to develop nuclear weapons and accept IAEA safeguards.

Nonetheless, we hope that we can use peaceful talks to achieve the purpose, rather than resort to the willful use of force or the intimidation of force. It's like treating the relationship between two individuals. If one individual tries to corner the other, then the effect will be counterproductive. That will do nothing in helping resolve the problem. Our purpose is to resolve the problem, not to escalate tensions.

And I also have a question for you: Don't you think that the efforts made by China in resolving the Korean nuclear issue and position we have adopted in this regard have actually helped the situation on the Korean peninsula move for the better day by day? And, of course, I know that it still takes time to seek a thorough and complete solution to the Korean nuclear issue, and on that basis to help put in place the security and stability in Northeast Asia. But, what I'd like to stress is that the model that we have adopted, and the efforts we have made, prove to be right in this, in this direction.

Zakaria: Since you honored me by asking the question, I will say to you, premier, that China's efforts in North Korea have been appreciated in the United States and around the world. And of course it makes people wish that China would be active in other areas in just the same productive way that it was in North Korea because we see that it produces results.

Wen Jiabao: We have gained a lot of experience and learned lessons from years of negotiations concerning the six-party talks, and the progress made in the six-party talks also has a lot to do with the close cooperation among the six parties.

Zakaria: May I ask you about another set of possible talks? The Dalai Lama has said now it appears that he would accept China's rule in Tibet, he accepts the socialist system in Tibet, and what he asks for is cultural autonomy and a certain degree of political autonomy. The talks apparently are stuck at a lower level between the Tibetans and the Chinese government. Why don't you, given your power and your negotiating skills, take the issue yourself -- and you or President Hu Jintao would negotiate directly with the Dalai Lama and solve this issue once and for all for the benefit of the Chinese people, and of course the Tibetan people who are also in China?

Wen Jiabao: Our issue with the Dalai Lama is not an ethnic, religious or cultural issue in the ordinary sense. It's a major principled issue concerning safeguarding the country's unity or allowing efforts to separate a country. And we must adopt a two-pronged approach in viewing the Dalai Lama. On one hand, it is true that the Dalai is a religious leader, and he enjoys certain influence in the Tibetan region, and particularly in regions that the inhabitants believe in Buddhism. And, on the other hand, we must also be aware that he is not an ordinary religious figure. The so-called government in exile founded by the Dalai Lama practices a theocratic rule. And the purpose of this so-called government in exile is to separate Tibet from China.

In many places all over the world, the Dalai Lama keeps preaching about the idea of a so-called autonomy in the greater Tibetan region. And actually, the so-called autonomy that he pursues is actually to use religion to intervene in politics. They want to separate the so-called greater Tibetan region from the motherland. And many people in the United States have no idea how big is the so-called greater Tibetan region, the so-called greater Tibetan region, preached by the Dalai Lama, actually covers Tibet, Sichuan, Yunnan, Qinghai and Gansu -- altogether five provinces. And the area covered by the so-called greater Tibetan region accounts for a quarter of China's territory.

For decades, our policy towards the Dalai Lama remains unchanged: that is, as long as the Dalai Lama is willing to recognize that Tibet is an inalienable part of China's territory, and as long as the Dalai Lama gives up his separatist activities, we're willing to have contact and talks with him or his representatives.

Now, sincerity holds the key to producing result out of the talks. After the Tibet incident back in the 1950's, the highest leader of the central government, Mr. Deng Xiaoping, also met the representatives of the Dalai Lama.

So, I don't think there is this problem, as whether I can have contact with the Dalai Lama. The real key lies in the effectiveness of such contact and talks.

We hope that he can use real actions to show sincerity and break the deadlock.

Zakaria: What action would you like to see from the Dalai Lama that would show sincerity?

Wen Jiabao: Actually, I already made it clear that when we observe any individual, the Dalai Lama included, we should not only watch what, we should not only observe what he says, but also watch what he does.

His sincerity can be demonstrated in giving up separatist activities.

Zakaria: And then you might meet with him?

Wen Jiabao: By then, everything depends on the development of the situation. Of course, talks may continue, and in light of the progress in the talks, we may also consider raising the level of the talks.

Zakaria: Premier Wen, your country has grown, as you pointed out, 9½ percent for 30 years -- fastest growth rate of any country in history. If people come to you and say to you, "What is the Chinese model of succeeding as a developing country?" What would you say? What is the key to your success? What is the model?

Wen Jiabao: It's easy to answer this question, that you may think about this thing -- that about 30 years ago, why China was not able to grow as fast as it has in the following years. I think this is attributable to the reforms and opening up a policy we introduced in 1978. This holds the key to China's success. By introducing reform and opening up, we have greatly emancipated productivity in China.

We have one important thought: that socialism can also practice market economy.

Zakaria: People think that's a contradiction. You have the market economy, where the market allocates resources, and in socialism, it's all central planning. How do you make both work?

Wen Jiabao: The complete formulation of our economic policy is to give full play to the basic role of market forces in allocating resources under the macroeconomic guidance and regulation of the government.

We have one important piece of experience of the past 30 years: that is to ensure that both the visible hand and the invisible hand are given full play in regulating the market forces.

If you are familiar with the classical works of Adam Smith, you will know that there are two famous works of his. One is "The Wealth of Nations"; the other is the book on the morality and ethics. And, "The Wealth of Nations" deals more with the invisible hand that are the market forces. And the other book deals with social equity and justice. And in the other book he wrote, he stressed the importance of playing the regulatory role of the government to further distribute the wealth among the people.

If in a country, most of the wealth is concentrated in the hands of the few, then this country can hardly witness harmony and stability.

The same approach also applies to the current U.S. economy. To address the current economic and financial problems in this country, we need to apply not only the visible hand but also the invisible hand.

Zakaria: May I ask you -- some Americans and Europeans, particularly human rights observers, say that China has cracked down on human rights over the last few years, that they had been hoping that the Olympics would lead to an opening of China, but that it has, there has been more repression. How would you respond to that?

Wen Jiabao: By hosting the Olympic Games, China has actually become more open. Anyone without biases will see -- have seen that. In the freedom of speech and the freedom in news media coverage are guaranteed in China. The Chinese government attaches importance to, and protects, human rights. We have incorporated these lines into the Chinese constitution, and we also implement the stipulation in real earnest. I think for any government, what is most important, is to ensure that its people enjoy each and every right given to them by the constitution.

Including their right to survival, freedom and to pursue their happiness.

We don't think that we are impeccable in terms of human rights. It is true that in some places and in some areas, we do have problems of this kind or that kind. Nonetheless, we are continuing to make efforts to make improvements, and we want to further improve human rights in our country.

Zakaria: When I go to China and I'm in a hotel and I type in the words Tiananmen Square in my computer, I get a firewall, what some people call the Great Firewall of China. Can you be an advanced society if you don't have freedom of information to find out information on the Internet?

Wen Jiabao: China now has over 200 million Internet users, and the freedom of Internet in China is recognized by many, even from the west. Nonetheless, to uphold state security, China, like many countries in the world, has also imposed some proper restrictions. That is for the safety, that is for the overall safety of the country and for the freedom of the majority of the people.

I can also tell you on the Internet in China, you can have access to a lot of postings that are quite critical about the government.

It is exactly through reading these critical opinions on the Internet that we try to locate problems and further improve our work.

I don't think a system or a government should fear critical opinions or views. Only by heeding those critical views would it be possible for us to further improve our work and make further progress.

I frequently browse the Internet to learn about a situation.

Zakaria: What are your favorite sites?

Wen Jiabao: I've browsed a lot of Internet Web sites.

Zakaria: I will take advantage of your kindness and ask you a question that many people around the world wonder about. There is a very famous photograph of you at Tiananmen square in 1989. What lesson did you take from your experiences in dealing with that problem in 1989?

Wen Jiabao: I believe that while moving ahead with economic reforms, we also need to advance political reforms, as our development is comprehensive in nature, our reform should also be comprehensive.

I think the core of your question is about the development of democracy in China. I believe when it comes to the development of democracy in China, we talk about progress to be made in three areas:

No. 1: We need to gradually improve the democratic election system so that state power will truly belong to the people and state power will be used to serve the people

No. 2: We need to improve the legal system, run the country according to law, and establish the country under the rule of law and we need to view an independent and just judicial system.

No. 3: Government should be subject to oversight by the people and that will ask us, call on us to increase transparency in government affairs and particularly it is also necessary for government to accept oversight by the news media and other parties.

There is also another important aspect that when it comes to development of democracy in China, we need to take into account China's national conditions, and we need to introduce a system that suits China's special features, and we need to introduce a gradual approach.

Zakaria: People say you're studying the Japanese system because there's democracy but there's only one party that seems to win the elections. Is that the kind of model you see for China?

Wen Jiabao: I think there are multiple forms of democracy in the world. What is important is the substance of democracy.

Which means that at the end of the day, what is important about democracy is that whether such form of democracy can really represent the calling and interest of the people.

Socialism as I understand it is a system of democracy. Without democracy, there is no socialism.

And such a democracy first and foremost should serve to ensure people's right to democratic elections, oversight and decision making.

Such a democracy should also help people to fully develop themselves in an all-around way in an environment featuring freedom and equality.

And such a democracy should be based on a full-fledged legal system. Otherwise, there would be chaos. That's why we need to run the country according to law and ensure that everyone is equal under the law.

Zakaria: We've talked about elections many times. Do you think in 25 years there will be national elections in which there will be a competition, there will be perhaps two parties, that will be running for a position such as your own?

Wen Jiabao: It's hard for me to predict what will happen in 25 years time. This being said, I have this conviction -- that China's democracy will continue to grow. In 20 to 30 years time, the whole Chinese society will be more democratic and fairer, and the legal system in China will further be improved. The socialism as we see it will further mature and improve.

Zakaria: Let me ask you, premier, finally a couple of questions that are personal. You've said that you've read the works of Marcus Aurelius a hundred times. Marcus Aurelius is a famous stoic philosopher. My reading of him says that one should not be involved in the self, and in any kind of pursuits that are self-interested but should be more for the community as a whole. When I go to China these days, I am struck by how much individualism there is, how much consumerism there is. Are you trying to send a signal to the Chinese people to think less about themselves and more about the community?

Wen Jiabao: It is true I did read the meditations written by Marcus Aurelius Antonio on many occasions, and I was very deeply impressed by the words that he wrote in the book -- to be fact - where are those people that were great for a time? They are all gone, leaving only a story, or some even just half a story. So I draw the conclusion that only people are in the position to create history and write history.

I very much value morality, and I do believe that entrepreneurs, economists and statesmen alike should pay much more attention to morality and ethics.

In my mind, the highest standard to measure the ethics and morality is justice.

That's why in the morning when I answered the question, I said that I believe in the veins of the economist, we should see the blood of morality.

When we think about economy, we think more about the real elements concerning the company, the capital, the market, the technology, so on and so forth. And we might forget about the other sort of elements that work behind the scene, and these factors are also affected by the visible factors like conviction and morality. Only when we combine these two kinds of factors, can we put in place a full picture of the DNA of the economy.

It is true in the course of China's economic development, some companies have actually pursued their profits at the expense of morality and we will never allow such things to happen.

We will not allow economic growth at the expense of the loss of morality because such approach simply can not sustain.

That's why we advocate the corporate, occupational and social ethics.

Zakaria: Let me ask you a final question, your excellency. You must have been watching the American election. What is your reaction to the strange race and election that we are having in this country?

Wen Jiabao: The presidential election of the United States should be decided by the American people. But what I follow very closely is the relationship between China and the United States after the election.

In recent years, there has been a sound growth momentum in the growth of China-U.S. relations. And we hope, and whoever is elected as the president and whoever is sworn in into the White House, no matter which party wins the election, that he or she and the parties will continue to grow the relationship with China. And China hopes to continue to improve and grow its relationship with the United States no matter who will take office and lead the new administration in this country.

Zakaria: On that happy note, I thank you, your excellency. I'm sure your people are worried we took a little extra time. And I thank you in advance for your kindness and your frankness.

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